Pakistan banks on IMF, World Bank, China loans
Islamabad, November 14, 2008
Pakistan expects the IMF and other lenders to provide billions of dollars in loans soon, and China to pitch in with $500 million to avert a balance of payments crisis, the country's top economic adviser said.
Pakistan has been trying to drum up financial support for some weeks and its tardiness in securing external assistance was cited by Standard & Poor's Ratings Services for its decision on Friday to lower Pakistan's credit rating on sovereign debt deeper into junk bond territory.
The economic adviser, Shaukat Tarin, told Reuters late on Thursday that the government would soon deliver a "letter of intent" to the International Monetary Fund, paving the way for the world's lender of last resort to rapidly release billions of dollars.
"Hopefully it will be done soon. We have done a lot of work on it so we want it to be completed soon," Tarin said.
Asked if that could happen within a week, Tarin responded: "Yes, hopefully."
Tarin told the Pakistan Senate on Thursday the country was likely to receive $5-6 billion from the World Bank and other international financial institutions by December, according to the Associated Press of Pakistan.
The loan from China could arrive within weeks. "We want to get it as quickly as possible... Hopefully it will be available in the next few weeks," Tarin told Reuters.
Markets were disappointed when President Asif Ali Zardari and Tarin returned with little concrete to show from a trip to Beijing last month to garner support from one of Pakistan's most steadfast allies.
China, like other potential lenders, is believed to have encouraged Pakistan to seek assistance from the IMF first in order to introduce some discipline to economic management, analysts say.
Pakistan is in talks with the IMF, though officials have been coy about saying whether a loan is being negotiated.
Tarin told the Senate the IMF "has agreed to provide (a) facility on our own terms and conditions."
He added that one condition would be that the government stops borrowing from the central bank.
"We discussed with IMF ... zero borrowing from State Bank. We believe there should be no net borrowing from State Bank," Tarin said.
The government had wanted to avoid harsh conditions the IMF might attach to any financial assistance, and explore other potential sources of loans first.-Reuters